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Amendments to Philadelphia’s Realty Transfer Tax Will Have a Significant Impact

On December 16, 2016 by Schnader

Recent amendments to Philadelphia’s realty transfer tax will likely change the way commercial real estate is bought and sold. Rather than sell the real estate directly and record a traditional deed to evidence the transaction, it is common practice to sell ownership interests in the company that holds title to the real estate. This approach often significantly reduces the realty transfer tax due as a result of the transaction because the value used to compute the tax is based on the property’s assessed value, which is often lower than the purchase price for the company. Moreover, selling less than 90% of the equity in the company does not trigger any tax at all, provided the seller holds the remaining equity for at least three years.

The amendments, which go into effect on July 1, 2017, change both of these frequently relied upon transfer tax rules.

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